COMPANY PROFILE
Alere Inc.
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Alere Inc. TABLE OF CONTENTS
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TABLE OF CONTENTS
Company Overview …………………………………………………………………………………………..3 Key Facts………………………………………………………………………………………………………….3 SWOT Analysis …………………………………………………………………………………………………4
Alere Inc. Company Overview
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Company Overview
COMPANY OVERVIEW
Alere Inc. (Alere or ‘the company’) is a developer and provider of consumer and professional medical diagnostic products. The company focuses on infectious and cardiometabolic diseases, toxicology, and immunology. It classifies its business into three segments: Professional Diagnostics, Consumer Diagnostics, and Other Non-Reportable. The company operates in the US, Europe and other countries. It is headquartered in Waltham, Massachusetts.
The company reported revenues of (US Dollars) US$2,463.3 million for the fiscal year ended December 2015 (FY2015), a decrease of 4.3% over FY2014. In FY2015, the company’s operating margin was 5.6%, compared to an operating margin of 3.6% in FY2014. The net profit of the company was US$206.4 million in FY2015, compared to a net loss of US$33.5 million in FY2014.
The company reported revenues of US$582.4 million for the third quarter ended September 2016, a decrease of 4.7% over the previous quarter.
Key Facts
KEY FACTS
Head Office Alere Inc. 51 Sawyer Road Suite 200 Waltham Massachusetts Waltham Massachusetts USA
Phone 1 781 6473900 Fax Web Address www.alere.com Revenue / turnover (USD Mn) 2,376.3 Financial Year End December Employees 9,700 New York Stock Exchange Ticker ALR
Alere Inc. SWOT Analysis
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SWOT Analysis
SWOT ANALYSIS
Alere Inc. (Alere or ‘the company’) is a developer and provider of consumer and professional medical diagnostic products. The company focuses on developing medical diagnostic products in the areas of cardiometabolic and infectious diseases, and drugs of abuse. It also offers rapid diagnostic tools. The company has direct global sales and distribution network, which enable it to make further inroads into major markets. However, healthcare reform legislations in the US would affect the company’s revenue and financial condition.
Strength
Direct Global Sales and Distribution Network Enabling Alere to Make Further Inroads into Major Markets Focus on Point-of-Care Rapid Diagnostics Products Providing a Strong Position in the Segment
Weakness
Product Recalls could Affect the Company’s Brand Image
Opportunity
Merger with Abbott to Create a Leading Point-of-Care Testing Business Marketing Approvals and Launch of New Products
Threat
Stringent Regulations for Healthcare Service Providers Healthcare Reform Legislations would Affect Alere’s Revenue and Financial Condition
Strength
Direct Global Sales and Distribution Network Enabling Alere to Make Further Inroads into Major Markets
Alere is a global company with strong manufacturing and distribution capabilities. The company’s major manufacturing facilities are located in various markets such as the US, Canada, China, Japan, South Korea, Germany, Scotland, Norway, India, Israel, and the UK. The company markets and sells its professional diagnostic products throughout the world. It distributes its professional diagnostic products to hospitals, reference laboratories, physician offices and other point-of-care settings through its own sales forces and distribution networks including in most major markets. In these regions as well as in all other major world markets, Alere also utilizes third-party distributors to sell its products. Medicare reimbursement process for physicians and for patients monitoring at home. In addition, the company markets its First Check consumer drug testing products and cholesterol monitoring products in the US through retail drug stores, retail food stores, drug wholesalers, and mass merchandisers.
With its significant presence across the globe through its strong distribution network, Alere addresses its broad customer base with diverse needs, which in turn enhances the company’s market penetration capabilities.
Focus on Point-of-Care Rapid Diagnostics Products Providing a Strong Position in the Segment
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Alere, by focusing solely on rapid point-of-care diagnostics products, has attained a strong position in the global point-of-care rapid diagnostics market. The company particularly concentrates in the therapeutic areas of cardiometabolic and infectious diseases, and drugs of abuse. In each of these categories, Alere has developed pioneering products such as epoc Reader and Host, which are two separate devices that communicate bi-directionally and provide a handheld, wireless solution used for testing blood gases, electrolytes, and metabolites; Alere BinaxNOW S. pneumoniae Antigen Card, a rapid assay for the qualitative detection of S. pneumoniae antigen in the urine of patients with pneumonia and in the cerebral spinal fluid (CSF) of patients with meningitis; and Alere Triage TOX Drug Screen, a fluorescence immunoassay to be used with the Alere Triage Meters for the qualitative determination of the presence of drug and/or the major metabolites above the threshold concentrations of up to 10 distinct drug classes, including assays for acetaminophen/paracetamol, amphetamines, methamphetamines, barbiturates, benzodiazepines, cocaine, methadone, opiates, phencyclidine, tetrahydrocannabinol (THC) and tricyclic antidepressants in urine.
Focus on point-of-care rapid diagnostics products has enabled Alere to combine near patient monitoring tools with value-added healthcare services.
Weakness
Product Recalls could Affect the Company’s Brand Image
Alere has recalled several of its products in the recent past. For instance, in July 2016, the company recalled Alere INRatio and INRatio 2 PT/INR Monitoring System. This action was initiated as a result of patients who had a therapeutic or near-therapeutic INR (international normalized ratio) with the Alere INRatio and INRatio 2 PT/INR Monitoring System but a significantly higher INR (outside of therapeutic range) when performed by a central laboratory. In 2015, the company recalled Alere i Influenza A & B assay due to high invalid rate and an increased risk of false negative results with certain lots of the Alere i Influenza A & B kit.
The company has been recalling products earlier also. In 2014, Alere San Diego recalled Alere Triage BNP Calibrators for the Beckman Coulter Access Family of Immunoassay Systems because the bottle labeled as Calibrator Level 5 actually contained Calibrator Level 4. This resulted in a calibration failure when attempting to calibrate using a calibrator kit which contains the affected Level 5 Calibrator. Also, in 2014, a voluntary urgent medical device correction was initiated by Alere with respect to its Alere INRatio and Alere INRatio2 systems to inform users not to use these systems to test patients with certain medical
Such product recalls could affect the company’s brand image and undermine its value proposition. It can also affect customer loyalty for the company’s private label products.
Opportunity
Merger with Abbott to Create a Leading Point-of-Care Testing Business
In February 2016, Abbott and Alere announced a definitive agreement for Abbott to acquire Alere for an
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expected equity value of $5.8 billion. In April 2017, Abbott and Alere agreed to amend the existing terms of their agreement for Abbott’s acquisition of Alere. Under the amended terms, Abbott would pay $51 per common share to acquire Alere, for a new expected equity value of approximately $5.3 billion, reduced from the originally expected equity value of approximately $5.8 billion. The transaction is expected to close by the end of the third quarter of 2017, subject to the approval of Alere shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.
The combination of the company and Abbott would create the world’s premier point of care testing business. The combined business would offer the broadest point of care menu of infectious disease, molecular, cardiometabolic and toxicology testing and would serve an expansive customer base around the world. More than half of Alere’s revenue is generated from the sale of its products in the US. Alere also has a growing presence in key international markets, where Abbott’s capabilities and infrastructure would drive accelerated growth of its portfolio.
Combining Alere’s leading platforms and global presence in point-of-care diagnostics with Abbott’s broad portfolio of market-leading products would create a world leading point of care testing business.
Marketing Approvals and Launch of New Products
Alere has received marketing approvals for some of its products recently. In April 2017, Alere announced that its Alere Reader, a diagnostic analyzer that can be used in both point-of-care and laboratory settings, had received 510(k) marketing clearance from the FDA. The Alere Reader would be initially available for use with the BinaxNOW Influenza A & B Card 2, with other lateral flow applications and assays to follow. This announcement represents the introduction into the US market of the Alere Reader, a diagnostic platform with objective result interpretation and connectivity capabilities that can be used to evaluate a wide variety of lateral flow immunoassay formats. In July 2017, Alere announced the availability of its point-of-care Alere iCup Rx Drug Screen for detecting commonly misused and abused prescription drugs. As reported by the company, the test enables physicians and addiction specialists to screen patients for benzodiazepines, buprenorphine, methadone, opiates and oxycodone in a clinically actionable timeframe, facilitating early detection of abuse and ensuring patient compliance with legitimately prescribed therapies.
Marketing approvals and launch of new products would help Alere in generating incremental revenues.
Threat
Stringent Regulations for Healthcare Service Providers
A portion of Alere’s healthcare products and services are paid for by private and governmental third-party payers, such as Medicare and Medicaid. These third-party payers typically have different and complex billing and documentation requirements that the company must satisfy in order to receive payment, and they carefully audit and monitor its compliance with these requirements. Alere must also comply with numerous other laws applicable to billing and payment for healthcare services, including privacy laws.
Failure to comply with these requirements may result in non-payment, refunds, exclusion from
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government healthcare programs, and civil or criminal liabilities, any of which may have a material adverse effect on the company’s revenues and earnings. In addition, failure by third-party payers to properly process Alere’s payment claims in a timely manner could delay the company’s receipt of payment for its products and services, which may have a material adverse effect on its cash flows.
Healthcare Reform Legislations would Affect Alere’s Revenue and Financial Condition
The Patient Protection and Affordable Care Act of 2010 (the ACA) makes comprehensive reforms at the federal and state level affecting the coverage and payment for healthcare services in the US. In particular, the ACA significantly alters Medicare Advantage reimbursements by setting the federal benchmark payment closer to the payments in the traditional fee-for-service Medicare program. This change has reduced Alere’s revenues from the Medicare Advantage plans for which it performs services. The ACA also included a 2.3% excise tax on the sale of certain medical devices sold outside the retail setting. For 2015, Alere incurred $9.9 million in excise tax expense related to the domestic sale of its medical device products as a result of the implementation of this tax. Although a moratorium was imposed on this excise tax for 2016 and 2017, the excise tax is currently scheduled to be restored in 2018, at which time Alere would again incur excise tax expense in connection with the sale of covered products. While the new presidential administration and the US Congress have indicated a strong desire to enact a permanent repeal of this excise tax, it is uncertain to predict whether such repeal would occur and, if so, whether it would occur before the scheduled restoration in 2018.
Additionally, the ACA imposes federal reporting requirements regarding payments or relationships between manufacturers of covered drugs, devices or biological or medical supplies (including many of Alere’s subsidiaries), and physicians and teaching hospitals. There are substantial penalties that may be assessed for the failure to report, or to report accurately, under these provisions. There remains a lack of clarity around many of the reporting rules and how they would be enforced.
Any negative outcomes of these enforcements, if effectuated, would affect Alere’s revenue and financial condition.
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